Returns On Capital Are Showing Encouraging Signs At Al Masane Al Kobra Mining (TADAWUL:1322)

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in Al Masane Al Kobra Mining's (TADAWUL:1322) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Al Masane Al Kobra Mining is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.12 = ر.س151m ÷ (ر.س1.5b - ر.س238m) (Based on the trailing twelve months to September 2024).

Thus, Al Masane Al Kobra Mining has an ROCE of 12%. That's a pretty standard return and it's in line with the industry average of 12%.

View our latest analysis for Al Masane Al Kobra Mining

Above you can see how the current ROCE for Al Masane Al Kobra Mining compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Al Masane Al Kobra Mining for free.

What Does the ROCE Trend For Al Masane Al Kobra Mining Tell Us?

Al Masane Al Kobra Mining has recently broken into profitability so their prior investments seem to be paying off. About five years ago the company was generating losses but things have turned around because it's now earning 12% on its capital. Not only that, but the company is utilizing 62% more capital than before, but that's to be expected from a company trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

In Conclusion...

Long story short, we're delighted to see that Al Masane Al Kobra Mining's reinvestment activities have paid off and the company is now profitable. Since the stock has returned a solid 37% to shareholders over the last year, it's fair to say investors are beginning to recognize these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

Like most companies, Al Masane Al Kobra Mining does come with some risks, and we've found 1 warning sign that you should be aware of.

While Al Masane Al Kobra Mining may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.